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Johnson warns of ‘wage-price spiral’ if pay packets rise with inflation

The Prime Minister set out plans to extend the right to buy to housing association tenants in a speech as he tried to get his premiership on track.

09 June 2022

Boris Johnson warned of a “wage-price spiral” if pay packets increase in line with soaring prices as he set out an extension of the right to buy to housing association tenants.

The Prime Minister announced a “benefits to bricks” scheme on Thursday to allow welfare payments to secure mortgages as he sought to get his embattled premiership back on track.

Mr Johnson pledged a review of the mortgage market under plans to help renters onto the property ladder after surviving a bruising Tory revolt against his leadership.

Right to Buy housing sales in England
(PA Graphics)

He suggested in a major speech in Blackpool there should be restraint on wage rises on the day the cost of a full tank of petrol for a family car exceeded £100 for the first time.

Calling for caution in the face of rapidly rising inflation, Mr Johnson warned the Government would “fan the flames of further price increases” if it tried to spend its way out of the cost-of-living crisis.

“We can’t fix the increase in the cost of living just by increasing wages to match the surge in prices, I think it’s naturally a good thing for wages to go up as skills and productivity increase – that’s what we want to see,” he added.

Boris Johnson
Boris Johnson takes part in a brick-laying lesson at Blackpool and The Fylde College (Peter Byrne/PA)

“But when a country faces an inflationary problem you can’t just pay more and spend more, you have to find ways of tackling the underlying causes of inflation.

“If wages continue to chase the increase in prices then we risk a wage-price spiral such as this country experienced in the 1970s.”

He warned that could create “stagflation” of inflation combined with stagnant economic growth.

“When a wage-price spiral begins there is only one cure and that is to slam the brakes on rising prices with higher interest rates,” he said, but argued this has an impact on mortgages, rents and investment, growth and jobs.

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